“I feel wronged. They won’t kill my hope” — Dilma Rousseff, the embattled President of Brazil. Rousseff doesn’t plan on going down without a fight after the Brazilian House voted to impeach her on grounds of corruption. Expect an all-out brawl soon as the case moves up to the Senate.
MARKET SNAPSHOT
Big Picture
- U.S. stocks opened the week higher, with the Dow ending the day above the psychologically key level of 18,000 for the first time since last July
- Japan’s Nikkei stock index fell over 3% thanks to a combo of bad news, including a stronger yen and the 7.3 magnitude earthquake that struck on Saturday
Alternatives to Watch
- Oil rebounded from as much as a 7% drop to finish only 1.4% lower after a massive worker’s strike in Kuwait slashed more than 60% of the country’s output, balancing out the failed production freeze meeting that took place last weekend in Doha
Market Movers
- Disney rose 3%, riding the success of “The Jungle Book,” which pulled in a solid $103 million over the weekend
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CORPORATE PRIMER
Morgan Stanley Keeps the Trend Alive
With a volatile start to 2016, it’s no surprise that big banks are getting burned. We thought Wells Fargo and Bank of America’s earnings were bad last week (and don’t let their stocks’ muted reactions fool you, as investors were already bracing for the worst). But now a new low has been set: Morgan Stanley released Q1 earnings yesterday, announcing a 53% plummet in quarterly profit and revenues that dropped a discouraging 21% year-over-year. Good god. The only good news? MS’s wealth management unit managed to escape the black hole largely unscathed, helping buoy the bank past Wall Street earnings expectations despite dismal numbers across the board.
More Than Just Cola
Expanding its repertoire was the smartest move PepsiCo ever made (a bit of an exaggeration, but let’s go with it). By diversifying its product offerings away from its legendary bubbly beverage, the food conglomerate’s snack sector thrived last quarter. Unfortunately, even with the growth, it still struggled due to a strong dollar (which hurt overseas profits) and unreliable macroeconomic activity in many markets. Executives are predicting a 4% increase in profits in 2016, but the skepticism continues—not so much with North America (we’re meeting our junk food quotas just fine over here), but with Europe and South America. The uncertainty has puzzled PepsiCo, leaving it no choice but to crack one open and wait it out.
The Battle of the Binge
Amazon and Netflix, the two biggest video streamers of our generation, are at it again. Here’s what’s new: in one corner, Netflix took a 10% after-hours stock hit after reporting earnings, even though the streaming service added 6.74 million subscribers last quarter. How could such a thing happen? A sad future ahead: only 2.5 million new subscribers are expected next quarter, as opposed to the 6.1 million that executives once thought were in the cards back in January. While Netflix was taking some heat, Amazon was in the other corner sitting pretty. Bezos and Co. are releasing a new video-only subscription service (sound familiar?) completely separate from the $8.99/month Amazon Prime service.
Mobile Video—It’s Its Own Thing
Mobile video isn’t just for when there’s not a computer or TV around. Proof: Verizon and Hearst Corp. have agreed to jointly acquire Complex Media, reaffirming the relevance of mobile video to the digital media landscape. Complex, the “video-first” lifestyle website, has over 50 million unique monthly users (a far cry from the Brew, but not too shabby), which drove its rumored $300 million valuation. The acquisition is a testament to both corporations’ M&A strategies, as old-fashioned media conglomerate Hearst continues to prove its ability to change with the times and Verizon continues to gobble up digital media companies (like AOL, and now maybe even Yahoo).
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OTHER STORIES
- McDonald’s offers all-you-can-eat fries promotion
- LinkedIn built a new app for college kids
- YouTube introduces live 360 video, the gateway drug to virtual reality
- Theranos is under investigation by SEC, U.S. Attorney’s Office
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ECONOMIC CALENDAR
- Monday: Netflix (+/-), Pepsi (+), IBM (+/-), Morgan Stanley (+/-), Hasbro (+) Earnings; Housing Market Index
- Tuesday: Johnson & Johnson, Intel, Goldman Sachs, Yahoo, Philip Morris, UnitedHealth, Harley-Davidson, Comerica Earnings; Housing Starts
- Wednesday: Coca-Cola, Qualcomm, American Express, Las Vegas Sands, Yum! Brands, Mattel Earnings; Existing Home Sales
- Thursday: Alphabet, Microsoft, Verizon, Visa, Starbucks, Schlumberger, General Motors, Under Armour, Southwest Airlines, D.R. Horton, Novartis Earnings; Weekly Jobless Claims
- Friday: General Electric, McDonald’s, Honeywell, Kimberly-Clark, Caterpillar, American Airlines Earnings; PMI Manufacturing Index
FAKE IT ‘TIL YOU MAKE IT
Wondering if your friend’s new bag is real? Well, these days, there’s an ever increasing chance it’s not—according to the Organisation for Economic Cooperation and Development, last year, counterfeit and pirated goods accounted for 2.5% of all trade in the world, which translates to over $460 billion. Here’s more:
- Though fake bags aren’t a new thing, they’ve become more popular: in 2009, they were estimated to amount to only $200 billion of all world imports.
- Who’s the biggest fan of fake goods? The European Union is the biggest consumer, importing 5% of all fakes (around $116 billion).
- The EU may be the biggest consumer of fake goods, but who’s actually making them? Perhaps it should come as no surprise that it’s China…but keep in mind that Chinese brands are also often the main victims.
INTERVIEW QUESTION OF THE DAY
You have three baskets and each basket contains exactly four balls. Each ball is either red, black, yellow or orange, and there is one of each color in each basket. You are blindfolded and each basket has been lightly shaken so that the balls are randomly distributed. If you take one ball from each basket, what chance is there that you would have exactly two red balls? (Answer)
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BUSINESS PERSON OF THE DAY
Bill Campbell, chief executive and chairman of financial software maker Intuit Inc., passed away yesterday at the age of 75. He was a mentor to some of Silicon Valley’s most successful leaders and innovators, including Steve Jobs and Larry Page. Campbell was known around the Valley as “The Coach.”
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FOOD FOR THOUGHT
Yesterday, a federal appeals court reaffirmed a $1 billion concussion settlement with some 5,000 retired NFL players. Sound like justice? The court called the ruling “imperfect but fair.”
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